The cycle of Purchasing

The cycle of purchasing refers to the process that organizations follow to acquire goods and services from external suppliers or vendors. The purchasing cycle typically includes the following steps:

1. Identify a Need: The first step in the purchasing cycle is to identify a need for a product or service. This may be initiated by an internal department or through a request from a customer or client.
2. Create a Purchase Requisition: Once a need has been identified, a purchase requisition is created. This document outlines the details of the requested product or service, including the quantity needed, delivery date, and any other relevant information.
3. Vendor Selection: After a purchase requisition is created, the next step is to identify potential suppliers or vendors who can provide the requested product or service. This involves researching and evaluating potential vendors based on their quality, pricing, delivery times, and other factors.
4. Request for Quotation: Once potential vendors have been identified, a request for quotation (RFQ) is sent out to request pricing information and other details about their products or services.
5. Negotiation and Contracting: After receiving responses to the RFQ, negotiations with the vendors take place to determine the best pricing, delivery times, and other terms of the contract. Once the negotiations are complete, a contract is signed between the organization and the vendor.
6. Purchase Order: After a contract has been signed, a purchase order is created and sent to the vendor. The purchase order contains all the details of the purchase, including the product or service description, quantity, price, delivery date, and payment terms.
7. Receiving and Inspection: When the products or services are received, they are inspected to ensure they meet the agreed-upon specifications.
8. Invoicing and Payment: Once the products or services have been received and inspected, an invoice is sent to the organization, and payment is made to the vendor according to the agreed-upon terms.
9. Performance Review: Finally, a performance review is conducted to evaluate the vendor's performance and determine if they meet the organization's standards. This information is used to improve future purchasing decisions and to maintain positive relationships with vendors.

By following these steps, organizations can effectively manage the purchasing cycle and ensure that they acquire the necessary goods and services in a timely and cost-effective manner.